In the fall of 2008 the economy of the United States faced significant obstacles as the banking and financial industries were rocked by rapid changes to the worlds financial system. Uncertainty surrounding many newly developed financial instruments caused massive shifts in prices across the globe. The impact was so devastating that one long time Wall Street banking stalwart, Lehman Brothers, was forced to declare bankruptcy. Several other major banks averted a similar fate only by being bought by competitors at a fraction of the price they would have commanded not a short time before.
Many experts predicted that the situation was so dire that a recession similar to that of the 1930’s was not only probable but even likely. As a result the government felt compelled to act and the United States congress quickly approved of an economic stimulus bill to help protect the economy from a massive recession. The bill called for two types of funds to be supplied; one was earmarked for the banks and other financial institutions and the other was for the general economy. The intent of the bill was twofold; immediately decrease the immediate risks to the banking sector and then provide steady stimulus to the economy to mitigate the impact of a recession.
The bill was quickly passed with subsequent administrations and congresses increasing the size and scope of many of the stimulus packages initially implemented. The banks benefited from programs such as TARP that helped them to rid themselves of assets which had become a burden on their financial books. The government also affirmed their commitment to bailing out the banks by working closely with them and other countries throughout the globe by promoting economic policy that benefited the financial industries. Things such as tax rates and fiscal policy were designed to help strengthen to banks.
The rest of the economy was also included in the governments bailout package. Vast sums of money were earmarked to promote growth in many industries including technology, environmental, manufacturing, and energy. Money was also used to set up education and training resources to help Americans suffering from the economic slowdown. Federal money was spread throughout the domestic economy through many paths including grant programs, extended unemployment benefits, payments to state governments, and subsidies.
The government’s attempt to stimulate the US economy in order to avert disaster was a controversial decision at the time and remains so today. Some thought the risks to the economy were not as terrible as many experts suggested while other opponents concurred with the potential risks but thought the proposed cure ineffective. Whatever opinion may ultimately prove correct it will undoubtedly be many years and trillions spent before anyone knows which.
Tags: bailout package, economic stimulus package, Government Grants